Anybody Got a Spare Lifeboat?

A subscription website called “The GlobalEurope (sic) Anticipation Bulletin” is following the financial crises across the world. That is has been doing so for a few years now can be seen by the news article datelines, some of which go back to 2006 (see this page for examples.)

Here is the beginning of their excerpted essay,

Phase IV of the systemic crisis: The sequence of global insolvency begins:

In 2007, LEAP/E2020 announced that US banks and consumers were both insolvent. More than a year ago, our team estimated that USD 10,000-billion worth in “ghost-assets” would vanish in the crisis. Both announcements came in complete opposition with the common opinion of that time; however they proved perfectly justified in the months after. In the same line, LEAP/E2020 today estimates that a new sequence of the fourth phase (so-called “decanting phase”) of the unfolding global systemic crisis has began: the sequence of global insolvency.

The heavy consequences conveyed by the global insolvency are anticipated in this GEAB N°31, of which this announcement presents an excerpt meant to put clearly what is at stake in this new sequence of the crisis.

To clarify, “GEAB N°31” appears to refer to the 31st essay (the whole of which is presumably behind the subscription firewall), published by “The GlobalEurope Anticipation Bulletin”.

The essay excerpt continues:

GEAB N°31 also details the 20 “ups and downs” of the year 2009 according to the LEAP/E2020 team : fifteen upward trends and fourteen downward trends, as many decision- and analysis-support instruments for all those worried or intrigued by the coming year.

It’s not clear what the LEAP/E2020 team is, but in the sidebar, snipped from the subscription side and used as a teaser, here’s what they see as some of the “ups and downs” for the coming year:

‘15-UP AND 14-DOWN’, Twenty-Nine Key Trends of 2009 - Fifteen subjects gain momentum along the year 2009 / Fourteen subjects lose momentum along the year 2009

Up or Down? State defaults; corporate profits; Very Great US depression; social unrest; middle-class purchasing power; UK, sick-man of Europe; US, sick-man of the world; industry and agriculture, central economic activities; Russian- and Chinese-style authoritarian management of economic modernization; anti-Semitism in the US; Brown, Merkel, Obama and Sarkozy; globalization; inflation; social welfare systems; regional blocks; NATO; instability in the Middle-East; EU-Russia strategic partnership; Eurozone; Yen-Yuan-Euro; Dollar-Sterling Pound-Swiss Franc; US T-Bonds; the Bretton Woods system; CDS (Credit Default Swaps); big financial scandals; “billionaires”; economic recovery… (page 11) [these teasers headlines are followed by a link to the subscription page - D]

There is more:
- - - - - - - - -

Contrary to what political leaders and their central bankers seem to believe worldwide, the problem of liquidity that they are striving to solve by means of historic interest rate drops and unlimited money creation, is not a cause but a consequence of the current crisis. It is in fact a problem of solvency which is digging “black holes” where liquidities disappear, whether we call these holes bank balance sheets (1), household debt (2), corporate bankruptcies or public deficits. In consideration of the fact that a conservative estimation of these “ghost-assets” reaches already USD 30,000-billion (3), our team considers that the world is now facing a situation of general insolvency affecting in the first place the most indebted countries and organizations (public or private) and/or those depending most on financial services.

Normally, when a source has footnotes as this one does, I either link to them or omit the numbering so as not to confuse our readers. Right now, I don’t have the energy to link to them, but I want to keep them intact here so that if any particular subject is of interest, a reader can click on the site for more information. The numbered footnotes with their links are at the bottom of the page. I will utlize one or two of those footnotes in this essay.

They also have some charts in this excerpt, one on “Market Capitalisation of Stock Markets Worldwide” (in trillions of US Dollars), and another illustrating “US Daily Bankruptcy Filings” (01/2006 - 11/2008). The latter is almost a straight line going from left to right, headed in a northeast direction…not a Happy Camper chart at all. No wonder economics is called “the dismal science”.

The authors contend that the source of all these woes is the fact that the global market was based on and driven by debt (is that another word for “credit”?):

… a large part of the world economy and all the economic players (including States)…based their growth on debt in the past years. The crisis translates and magnifies a problem of global insolvency. The world is becoming aware of the fact that it is a lot poorer than it used to believe in the last decade. And 2009 is the year when all the economic players must try to assess their real level of solvency, knowing that many assets are still losing value. Moreover a growing number of investors no longer trust the traditional instruments and indicators of measurement. Quoting agencies have lost all credibility. The US Dollar is just a fiction of international monetary unit and many countries are striving to get away from it as quickly as possible (6). Thus, quite rightly, the entire financial sphere is suspected of being a giant black hole. Concerning companies, no one can tell if their order books are reliable (7) because in every sector customers cancel their orders (8) or just stop buying, even when prices are discounted, as indicated by dropping retail sales in the past few weeks (9). Concerning States (and municipalities), slumping fiscal revenues are likely to result in even higher deficits and then bankruptcies. As a matter of fact, Russian billionaires (10), Gulf oil-monarchies, Chinese commercial Eldorados (11), all the " golden-egg geese " of companies and financial institutions of the planet (namely European, Japanese and North-American ones (12)) turn out to be insolvent or hardly solvent. The question of the solvency of the US federal State and federated states (13) (as well as of Russia or the United-Kingdom) is beginning to be asked by some big international media; as well as the question of the solvency of large capital-based pension funds, major players in this past twenty years’ globalised economy.

According to LEAP/E2020, the trend is clear: the sequence that has begun this year is a sequence of global insolvency.

What stands out here is that no one really knows what is going on. All of us have had that sneaking suspicion for some time, but now we know it’s true. There is no expert waiting in the wings to tell us the secret of extricating ourselves from this mess. This information makes the shenanigans of the US Imperial Congress, spending like a drunken sailor and steering the ship of state in their inebriated ignorance, look very dangerous indeed. There is no way to jump off, we just have to brace for the moment when these fools run aground. What follows after that is anyone’s guess.

One link led to Lew Rockwell’s site and once there to a post from December 2008, discussing the relative safety of individual banks.

This post makes explicit the banking information that I have wondered about and attempted to find ever since that mess with Washington Mutual (remember when they failed, and also failed to notify their customers so that the future Baron’s funds for school were tied up? That nightmare led to fruitless searches for information on our bank’s stability). Have you had any conversations at work about how “safe” banks are now, and if there is such a creature as a “safe bank”?

Chris Brunner explains why I had such trouble locating the information:

Ready to see where your bank stands?

A few days ago, a friend of mine called me to ask if I had any idea how to figure out which banks would be the next to fail. Some extensive googling revealed that while lists of troubled banks obviously exist, none of them seem to be readily available to the public. Why? Because the bankers do not want you to have this. Just watch the president of the American Bankers Association in this interview talk about how important it is to keep this private.

This is a list of all of the banks in the United States and the corresponding Texas Ratio for each one. Developed by Gerard Cassidy, the Texas ratio is a measure of a bank’s credit troubles. Basically, the higher the ratio, the worse the situation is for that particular bank. Banks with a ratio of 100 and higher are in very serious danger of collapse, and banks with a ratio of 50 or higher are vulnerable.

This is the formula I used:

100 * ((Non-performing Assets - U.S guaranteed loans) + Other REO) / (Equity + Loss Reserves)

All of this information is available on the FDIC website, but it’s extremely difficult to gather in a meaningful way. In fact, I don’t think you’ll find a list like this anywhere else on the internet.

I believe Mr. Brunner when he says it’s hard to find. I’ve looked high and low for information on bank ratings and it can’t be found easily. I just happened to stumble on the one he so kindly provides.

He compiled this list (the one linked in his post) at the end of December. Is his listing still current? I don’t know. But there’s darn little else out there.

You’ll notice his link to an interview with a bank president on ABC news. Unfortunately, the video didn’t appear in my link; it might in yours, or it may have stale-dated. However, they did give a link to a chart (a Word doc) of the ten most vulnerable banks at the time of that news report.

The compilers of that chart also used the “Texas Ratio” and though the list is quite short, it is utterly appalling. If a bank with a ratio of 100 is in do-do up to its neck, what are we to make of the situation for Integrity (sic) Bank’s customers when it has a ratio of 191.6? That bank is in Georgia. Another, with the secure sounding name of “Colorado Federal Savings”, leads the list of losers with a score of 244.8 - heaven help the poor souls who put their savings in that one. These banks may have ceased to exist by now; the list seems to have been compiled about six weeks ago and there has been mention in the news of more bank failures.

I mentioned above the problems we’ll face when the USS Bloviation (our national legislature) runs aground. It won’t be pretty, but we’re in uncharted waters and captained by an inexperienced man who plays loose with what facts he does understand. In this situation, worry is a normal response. On the GEAB site, in the footnotes, I found a link to this story in a Texas newspaper:

A U.S. Army War College report warns an economic crisis in the United States could lead to massive civil unrest and the need to call on the military to restore order.

Retired Army Lt. Col. Nathan Freir wrote the report “Known Unknowns: Unconventional Strategic Shocks in Defense Strategy Development,” which the Army think tank in Carlisle, Pa., recently released.

“Widespread civil violence inside the United States would force the defense establishment to reorient priorities … to defend basic domestic order and human security,” the report said, in case of “unforeseen economic collapse,” “pervasive public health emergencies,” and “catastrophic natural and human disasters,” among other possible crises.

The report also suggests the new (Barack Obama) administration could face a “strategic shock” within the first eight months in office.

Fort Bliss spokeswoman Jean Offutt said the Army post is not involved in any recent talks about a potential military response to civil unrest.

The report become a hot Internet item after Phoenix police told the Phoenix Business Journal they’re prepared to deal with such an event, and the International Monetary Fund’s managing director, Dominique Strauss-Khan, said social unrest could spread to advanced countries if the global economic crisis worsens.

[…]

Earlier this year, Pentagon officials said as many as 20,000 soldiers under the U.S. Northern Command (NORTHCOM) will be trained within the next three years to work with civilian law enforcement in homeland security.

[…]

In case civilian authorities request help or become overwhelmed, El Paso has several National Guard and military reserve units that can be called on. In 1992, National Guard and active Marine and Army units were deployed to help police control riots and looting in Los Angeles.

Charles Boehmer, political science professor at the University of Texas at El Paso, was skeptical about the Army War College report.

“The military was not called out during the Great Depression, and I don’t think our economic problems are as bad as they were then,” he said. “The military always has contingency plans. It’s a think tank’s job to come up with scenarios, but that doesn’t mean it represents an active interest on the part of the (Pentagon).”

Is this news analysis simply scare-mongering by The El Paso Times? Again, who knows? Despite the opinions of Professor Boehmer in the report, this looming disaster doesn’t have any precedents, including the Great Depression in the 1930’s. We live in a different world, a far more indebted, insolvent world than Roosevelt could have imagined or John Maynard Keynes could have solved with his make-work ideas.

This is one case where looking to the past will be of no help. In fact, to expect 1930’s Big Spending solutions to work when the albatross created by those 1930’s solutions hangs yet around our necks is the height of folly. But then again, the Democrats control the Executive Branch and both the House and Senate. Democrats understand one solution to problems: throw money at all of them. After all, those billions devoted to the War on Poverty cured that mess, sure enough. Thanks to that horrendous boondoggle, we ain’t got no more poor people. Not a one.

It’s what happens after the money runs out that is the mystery. On the old maps, they wrote of uncharted waters, “Here Be Monsters”. We’re headed for those deeps, all of us.

Be sure to pack large cans of monster repellent spray. A life boat wouldn’t be a bad idea, either, and a few swimming lessons while there is still time would be in order.

Those so inclined can pack a prayer book, while no doubt some will be stockpiling ammunition.


Hat tip: Holger Danske